Summary of Commission Decision of 24 February 2022 declaring a concentration compatible with the internal market and the functioning of the EEA Agreement (Case M.10078 – Cargotec/Konecranes) (notified under document C(2022) 1070) (Only the English version is authentic) (Text with EEA relevance) 2022/C 298/07
Date: 2022-02-24
Institutions: Directorate-General for Competition, European Commission
Subjects: economic concentration, handling, harbour installation, load, maritime shipping, merger control, provision of services, road transport








C_2022298EN.01006301.xml










5.8.2022   


EN


Official Journal of the European Union


C 298/63






Summary of Commission Decision
of 24 February 2022
declaring a concentration compatible with the internal market and the functioning of the EEA Agreement
(Case M.10078 – Cargotec/Konecranes)


(notified under document C(2022) 1070)


(Only the English version is authentic)
(Text with EEA relevance)
(2022/C 298/07)

On 24 February 2022 the Commission adopted a Decision in a merger case under Council Regulation (EC) No 139/2004 of 20 January 2004 on the control of concentrations between undertakings (1)
, and in particular Article 8(2) of that Regulation. A non-confidential version of the full Decision can be found in English on the website of the Directorate-General for Competition, at the following address: http://ec.europa.eu/competition/elojade/isef/index.cfm?clear=1&policy_area_id=2

I.   THE PARTIES









(1)


Cargotec, headquartered in Helsinki, Finland, offers equipment and services in particular for cargo handling in ports, terminals, and for ship and road transport. Cargotec’s main activities are organised into the (i) Kalmar business, which offers container handling equipment and terminal automated solutions; (ii) Hiab, which offers on-road load handling equipment; and (iii) MacGregor, which provides engineering solutions and services for the maritime industry.












(2)


Konecranes, headquartered in Hyvinkää, Finland, offers equipment and services in particular for lifting and cargo handling in shipyards, ports and terminals. Konecranes’ main activities are organised into the (i) Port Solutions business, which offers container handling equipment and automation technology; (ii) Industrial Equipment, which offers hoists, cranes and material handling solutions for manufacturing and processing industries.




II.   THE OPERATION









(3)


On 28 May 2021, the Commission received a notification of a proposed concentration pursuant to Article 4 of Council Regulation (EC) No 139/2004 (the ‘Merger Regulation’) by which Cargotec Corporation (‘Cargotec’, Finland) intends to enter into a full merger within the meaning of Article 3(1)(a) of the Merger Regulation with Konecranes Plc (‘Konecranes’, Finland) by way of a statutory absorption merger under Finnish law (the ‘Transaction’ and the ‘Proposed Transaction’) (2). Cargotec and Konecranes are referred to together as the ‘Notifying Parties’ or the ‘Parties’.












(4)


On 2 July 2021, based on the initial market investigation, the Commission raised serious doubts as to the compatibility of the Transaction with the internal market and the functioning of the EEA Agreement, and adopted a decision to initiate proceedings pursuant to Article 6(1)(c) of the Merger Regulation.












(5)


On 22 October 2021, the Commission adopted a Statement of Objections (‘SO’). In the SO, the Commission set out the preliminary view that the Transaction would likely significantly impede effective competition in the internal market, within the meaning of Article 2 of the Merger Regulation. In particular, the Commission raised objections in the rubber-tired gantry cranes (RTGs) market, the straddle and shuttle carrier markets as well as in the following mobile equipment markets: reach stackers, empty container handler and heavy-duty forklift trucks (>10 tonne capacity). The Commission also raised a customer foreclosure concern regarding the supply of mobile equipment spreaders.












(6)


On 9 November 2021, the Notifying Parties submitted their reply to the SO and on 16 November 2021, an Oral hearing was held. As the Commission maintained its objections, on 9 December 2021, the Notifying Parties submitted commitments pursuant to Article 8(2) of the Merger Regulation in order to address the competition concerns identified in the SO. In view of the market test results, the Notifying Parties submitted revised commitments on 6 January 2022. In view of the results of the second market test, the Notifying Parties submitted a signed addendum to the Commitments on 20 January 2022.




III.   SUMMARY









(7)


The Commission raised competition concerns as to the compatibility with the internal market with regard to rubber-tired gantry cranes (‘RTGs’), straddle/shuttle carriers, reach stackers, empty container handlers and heavy-duty lift trucks (>10 tonne capacity). In addition, the Commission also raised a customer foreclosure concern regarding the supply of mobile equipment spreaders.












(8)


Based on the results of the market test, and the assessment of the commitments, the revised commitments eliminate the competition concerns identified by the Commission arising from the proposed Transaction.












(9)


Therefore, a conditional clearance decision pursuant to Article 8(2) of the Merger Regulation is proposed for adoption.




IV.   EXPLANATORY MEMORANDUM

1.1.   THE RELEVANT PRODUCT MARKETS









(10)


This Section presents the relevant markets where the Commission took the preliminary view that the Transaction would lead to a significant impediment of effective competition. The Commission has also defined and investigated other relevant markets where the Parties activities overlap, or where there were vertical links but where no concerns were raised (3).




1.1.1.   The Rubber-Tired Gantry Cranes Market









(11)


Rubber-tired gantry cranes (‘RTGs’) are the most common yard handling system in large container terminals and specialised container storage yards. While the vast majority of RTGs are manually operated, both Parties also sell automated RTGs, which are controlled via a software solution.












(12)


The Commission takes the view that the markets for RTGs (either manually-driven or automated) likely constitute separate markets from other gantry cranes such as rail-mounted gantry cranes (‘RMGs’) or automated stacking cranes (‘ASCs’).












(13)


The Commission also concludes that suppliers active outside the EEA do not constitute an effective competitive constrain to EEA suppliers and therefore takes the view that the relevant geographic market for the supply of RTGs is EEA wide.




1.1.2.   The Straddle and Shuttle Carriers Market









(14)


Straddle and shuttle carriers are both mounted on wheels and have a hoisting structure allowing them to lift containers. Straddle carriers are able to lift and stack containers up to four high. They are also used to transport containers from and to the yard, as well as to load/unload trucks and railcars. Shuttle carriers are largely identical to straddle carriers but have shorter legs, and therefore are primarily used to transport (and not stack) containers.












(15)


The Commission takes the view that straddle and shuttle carriers constitute a distinct product market from other types of horizontal equipment and stacking equipment such as gantry cranes. A further sub-segmentation into straddle carriers and shuttle carriers can ultimately be left open, as the Proposed Transaction raises concerns under both of these segmentations and on the overall market.












(16)


The Commission considers that the exact delineation of the geographic market can be left open for the purposes of this Decision as the Proposed Transaction raises concerns under both an EEA-wide or global geographic markets.




1.1.3.   Mobile Equipment Markets









(17)


Mobile equipment is mainly used to transport and lift containers, other cargo and flat racks in terminals. It usually includes (empty or full) container handlers and forklift trucks in addition to reach stackers. This equipment is also used by industrial and logistics companies.












(18)


Reach stackers have a boom with a spreader that grips the container from above, allowing it to operate several rows deep (i.e. they are able to reach containers located in the second or third row of a container stack).












(19)


Empty container handlers are masted lift trucks able to stack containers only in the first row. They have a lower lifting capacity than full container handlers and are used to stack unladen containers, generally up to eight containers high.












(20)


Heavy-duty forklift trucks (>10 tonne capacity) are masted lift trucks equipped with a fork. They are used for a range of heavy-duty lifting applications, including non-container goods and cargo.












(21)


The Commission considers that reach stackers, empty container handlers and heavy- duty forklift trucks (>10 tonne capacity) constitute each a distinct product market, mainly due to very limited demand-side substitutability and limited supply-side substitutability.












(22)


The Commission also considers that each of these three product markets are EEA wide, due to demand characteristics and some supply factors such as the need for a regional presence.




1.1.4.   Spreaders









(23)


Spreaders are devices used for grabbing containers and unitised cargo, usually with a locking mechanism at each corner of the spreader that attaches to the four corners of the container. They are used in all types of port cranes, some horizontal transport equipment and some mobile equipment.












(24)


The Commission takes the view that mobile equipment spreaders constitute a separate market from other type of spreaders, including from cranes spreaders, due to no demand-side substitutability and limited supply-side substitutability.












(25)


The Commission considers that the relevant geographic market is at least EEA wide.




1.2.   COMPETITIVE ASSESSMENT









(26)


This Section also focuses on the relevant markets where the Commission considered that the Transaction could significantly impede effective competition.




1.2.1.   Horizontal non-coordinated effects in the RTG market









(27)


In the market for RTGs, the merged entity would have a combined share [70-80] % in the EEA, being three times larger than the next competitor, ZPMC. While Cargotec has been decreasing in its share, Konecranes remained the undisputed market leader. While ZPMC grew share recently, this is based mainly on a single tender, the largest ever awarded in the EEA. Moreover, the specificity of EEA demand, and high barriers to entry explain why other non-EEA based players have not sold a single piece of RTG equipment to any customer in the past 10 years. Other EEA suppliers are too small to constitute real alternative to the Parties. As regards the declining profitability of the Cargotec business, the evidence provided by the Parties is not sufficient to conclude that Cargotec would exit the market absent the merger.












(28)


In the draft, the Commission therefore concludes that the Transaction as notified significantly impedes effective competition by creating a dominant position in the RTGs EEA market.




1.2.2.   Horizontal non-coordinated effects in the straddle/shuttle carriers market









(29)


In straddle and shuttle carriers, the Transaction would essentially result in a merger to monopoly, with shares [90-100] % both at EEA and global level. While China’s ZPMC has recently entered the market, it would be the only (very small) competitor left in the market. The market investigation confirmed that ZPMC is unlikely to receive large-scale orders in the next five years.












(30)


The Commission therefore concludes that the Transaction as notified significantly impedes effective competition by creating a dominant position.




1.2.3.   Horizontal non-coordinated effects in the mobile equipment markets









(31)


In the reach stackers market, the Transaction would lead to a very large market share of the Merged Entity (over 70 %) in an already concentrated market. It would also eliminate competition between the Notifying Parties, which compete intensely and closely and have plans to grow share. In addition, there are not sufficient alternatives to constrain the merged entity.












(32)


The Commission therefore concludes that the Transaction as notified significantly impedes effective competition by creating a dominant position.












(33)


In the empty container handlers market, the Transaction would create a quasi duopolistic situation where the Merged Entity would be the market leader with a large market share ([40-50] %) and only one large competitor (Hyster). The Transaction would eliminate competition between the Notifying Parties, which pre-Transaction compete intensely and closely. In addition, there are not sufficient alternatives to constrain the merged entity. On the contrary, the Transaction would likely reduce the competitive pressure on remaining competitors, making a second order price increase likely.












(34)


The Commission therefore concludes that the Transaction would significantly impede effective competition, by eliminating important competitive constraints that the Notifying Parties had exerted upon each other and by reducing competitive pressure on the remaining competitors.












(35)


In the heavy-duty forklift trucks (>10 tonne capacity) market, the Transaction would lead to a very large market share of the Merged Entity (over 50 %) in an already concentrated market. It would also eliminate competition between the Notifying Parties, which compete intensely and closely. In addition, there are not sufficient alternatives to constrain the merged entity.












(36)


The Commission therefore considers that the Transaction would significantly impede effective competition in the EEA heavy-duty forklift trucks (>10 tonne capacity) market, by creating a dominant position and by eliminating important competitive constraints.




1.2.4.   Customer foreclosure effects in the mobile equipment spreaders market









(37)


As regards vertical links, Cargotec is currently active through its subsidiary Bromma in the upstream supply of mobile equipment spreaders. Konecranes sources mobile equipment spreaders from the only independent manufacturer, Elme. The shift of the significant demand of Konecranes to Bromma would therefore affect Elme, and have an impact on the market. Given the position of Cargotec in the upstream market, the importance of Konecranes downstream, as well as the combined position in mobile equipment downstream, the Merged Entity would have the ability and incentive to foreclose Elme from its important customer.




1.2.5.   Conclusion









(38)


The decision, therefore, concludes that the notified concentration raises serious doubts as to its compatibility with the internal Market with regard to RTGs, straddle/shuttle carriers, reach stackers, empty container handlers and heavy-duty lift trucks (>10 tonne capacity). In addition, the Commission also raises a customer foreclosure concern regarding the supply of mobile equipment spreaders.




1.2.6.   Undertakings submitted by the Parties









(39)


In order to address the aforementioned competition concerns, the Parties have submitted the undertakings described below.












(40)


To address the concerns in the RTGs and straddle and shuttle carriers markets, Cargotec commits to divest its port cranes and straddle/shuttle carriers’ business unit, known as ‘Kalmar Automation Solutions’ or ‘KAS’. The Divestment of KAS includes all tangible and intangible assets and the personnel as described in the Schedule and Appendixes of the Commitments (the ‘KAS Package’), amongst others:






(a)


All product lines, related inventory of finished goods, components, raw materials and spare parts, as well as tools and equipment used for project delivery on-site installation.










(b)


Product development projects.










(c)


Customer agreements and at the request of the Purchaser, supply and dealership/agency agreements.










(d)


Patents, and other intellectual property rights and knowhow (IPR) currently used exclusively or predominantly by the KAS business. In addition, at the request of the purchaser, a license to the IPR currently used in products outside the scope of the Divestment Business, but also used in the KAS business.










(e)


The divestment of the ‘Kalmar’ brand for use in relation to the supply and servicing of Port Cranes and HTE, in case the Purchase does not have a known brand in the material handling or heavy-duty equipment industry. The Parties retain the right to use the Kalmar brand in relation to any other equipment, but will differentiate it.










(f)


In case the purchaser has already a known brand in this industry, it can request that the Notifying Parties do not use the Kalmar brand to sell any port cranes and/or horizontal equipment for a period of ten (10) years from Closing. Also at the option of the purchaser, the Parties and the purchaser will enter into arrangements to allow the purchaser to sell port cranes and horizontal equipment using the Kalmar brand for a period of five years.










(g)


At the request of the purchaser, the transfer of the assembly contract that Cargotec currently has with the Chinese sub-contractor and the final assembly service contract by PTZ in Poland.
















(41)


The package also foresees the divestment of Cargotec’s assembly site in Stargard, with the exception of all personnel and assets used by Cargotec’s loader-crane business unit Hiab. Cargotec will also carve-out all assets and personnel used exclusively for Cargotec’s mobile equipment business subject to the Monitoring Trustee’s view and approval by the Commission. The transfer of these assets shall be completed within twenty-four (24) months from Closing. In the meantime, Cargotec and the purchaser will enter into a transitional lease and services agreement.












(42)


In addition, the package includes an upfront buyer clause and specific purchaser criteria.












(43)


To address the concerns in the mobile equipment markets, Konecranes commits to divest its business for the manufacturing, and commercialization of reach stackers, full container handlers, empty container handlers, as well as forklift trucks and related spare parts and technical support (the ‘MEQ Package’). Among the tangible and intangible assets and personnel to be divested are:






(a)


Konecranes’ mobile equipment R&D, manufacturing site and distribution center for spare parts located in Sweden and the manufacturing site and spare parts distribution center in China;










(b)


All mobile equipment product lines; all existing inventory of finished goods, components, raw materials and spare parts, including transitional service agreements for the storage of spare-parts, as well as the manufacturing, testing and servicing equipment.










(c)


R&D and pipeline projects and related information.










(d)


Customer, distributor, agent and supply agreements entered into by the legal entities part of the Divestment Business.










(e)


Konecranes will use its reasonable best efforts to transfer agreements regarding the supply of mobile equipment, which are not entered into by the legal entities part of the Divestment Business. Should customers not agree with the transfer, Konecranes will use its best efforts to find another solution to transfer the relevant business.










(f)


Brands, patents, design rights and other intellectual property technology and knowhow currently used exclusively or predominantly in mobile equipment business.










(g)


At the request of the Purchaser, a license to use Konecranes brand to sell the existing inventory and spare parts of mobile equipment products and a ‘black out’ period during which neither the Parties nor the Purchaser will be allowed to sell mobile equipment products under the Konecranes brand.










(h)


At the request of the purchaser, Konecranes will provide a license to those patents and other intellectual property, technology and know-how used by Konecranes primarily in products outside the scope of the MEQ Divestment Business but which are also used in the mobile equipment business;










(i)


At request of the Purchaser, Konecranes will also offer transitional services agreements, including: remote monitoring and maintenance management platforms. With respect to TruConnect, at the option of the purchaser, Konecranes may instead provide a duplicate of TruConnect for the mobile equipment.
















(44)


This package also includes an upfront buyer clause.




1.2.7.   Assessment of the undertakings submitted









(45)


The Commission considers the KAS package removes the entire horizontal overlap brought about by the Transaction in RTGs as well as in straddle and shuttle carriers markets. The KAS package also consists of a viable and stand-alone business that can compete effectively with the Merged Entity on a lasting basis. In particular, the reverse carve out of the Stargard plant and the licence followed by a black-out period of the Kalmar Brand, in particular, contribute to the attractiveness and viability of the divestment business. In addition, the upfront buyer clause together with the required Commission’s approval to retain any assets in the Stargard plant mitigate the implementation risks of such divestment.












(46)


The Commission considers the MEQ package removes the horizontal overlaps in mobile equipment markets and the risk of customer foreclosure in the mobile equipment spreaders market. The MEQ package also includes a viable and competitive business that can effectively compete with the Merged Entity on a lasting basis. In addition, the upfront buyer clause ensures that the Transaction will only be implemented once the Commission has approved a purchaser, limiting any potential implementation risks.












(47)


In its draft decision, the Commission has, therefore, reached the conclusion that, on the basis of the undertakings submitted by the Parties, the notified concentration will not lead to a significant impediment of competition in the following markets: RTGs, straddle and shuttle carriers, reach stackers, empty container handlers, heavy duty forklift trucks and mobile equipment spreaders.




V.   CONCLUSION









(48)


For the reasons mentioned above, the decision concludes that the proposed concentration subject to full compliance with the undertakings given by the Parties will not significantly impede effective competition in the Internal Market or in a substantial part of it.












(49)


Consequently the concentration should be declared compatible with the Internal Market and the functioning of the EEA Agreement, in accordance with Article2(2) and Article 8(2) of the Merger Regulation and Article 57 of the EEA Agreement, under the conditions and obligations intended to ensure that the undertakings concerned comply with the commitments they have entered into vis-à-vis the Commission.






(1)  OJ L 24, 29.1.2004, p. 1.

(2)  Publication in OJ C 215, 7.6.2021, p. 8.

(3)  These markets concern the horizontal overlap in ship to shore cranes market, the rail-mounted gantry crane market and the automatic stacking cranes market, the potential overlap in the automated guided vehicle market and in terminal tractors market, as well as the vertical link between the crane spreaders market (upstream) and the mobile harbour cranes (downstream).